What are some good loans for people with bad credit ratings?

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Quick Answer

Personal loans, instead of credit cards and payday loans, offer a good option for those seeking to rebuild poor credit ratings, explains Avant. Personal loans often offer a lower interest rate, spread reasonable payments out over a manageable period of time and can build positive credit history when borrowers make payments on time. Borrowers should borrow from lenders who report to credit bureaus to ensure this positive history goes onto their credit report.

Other benefits of personal loans over credit card debt or payday loans include a definite end date and fixed interest rates, notes Avant. Everett Credit Union offers programs for those just starting to build credit and for those seeking to repair their credit, according to the company website.

Credit counseling organizations offer services that pair people with poor credit ratings to credit lenders willing to extend loans that help repair their credit history, states the Federal Trade Commission. These organizations help to protect those with poor credit from companies promising instant credit repair by securing legitimate services, and universities, military bases, credit unions, housing authorities and the U.S. Cooperative Extension Service operate nonprofit credit counseling programs.

Nonprofit organizations that offer in-person credit counseling prove the most reliable as even a nonprofit status can hide illegitimate services, cautions the Federal Trade Commission. Those with poor credit should beware of offers that guarantee a repaired credit report or a loan, notes Capital One.